Thursday, August 4, 2011

Sharing Company Financials with Employees

I'm a HUGE advocate of sharing company financials with employees. I've had some pushback from clients initially but they usually (although not always) come around. My role is to help business owners think bigger and sharing company financials is a way to make sure that everyone in the company does just that. It's hard to tell people to "pay attention to the bottom line" or "help drive more sales" or "your bonuses are smaller because we didn't meet our numbers" when they have no idea what the numbers you are referring to are...or where those numbers should be. According to an Inc.com article, putting and keeping employees in the financial know increases the company's cohesion.

Here's an excerpt from the article:

----------“Its consistent with business planning—sharing 1-, 3-, and 5-year goals,” he believes. “It's a big part of making a participative culture vs. a patriarchal culture.” Communicate to your employees the relationship between the current finances and the company's future success.“You should never give raw financials because they wouldn't make sense,” says Rivers. “Its just gobbledygook unless they are accountants. You should present information in digest or summary format.”Use percentages, bar graphs and pie charts,” Rivers advises if not to help get the message across, then perhaps away to avoid sharing exact digits.------------

If you want to optimally manage your company finances and truly grow your business, you have to understand your financials and so do your employees. You don't have to - nor should you - share detailed information about all the items that go into the numbers. But if your sales team is rewarded based on gross margins or gross profits, then you should share those numbers with them...and some of the numbers that go into that calculation. If your company needs to reduce expenses and focus on improving net profit, you should share the net profit number and some of the major expenses that reduce the net profit number. Or you could share numbers on a per customer basis (if you have a smaller number of customers who contribute a large portion of sales), or a per project basis, or whatever applies to your company and situation. "Knowledge is power" is the saying. I modify it to say, "Knowledge can be power, if you put that knowledge into action."